ISODA petition stranded due to lawyers' strike in Chennai

Chennai: Infotech Software Dealers Association (ISODA), which was planning to file a legal petition in the Chennai courts, asking for clarity in the software taxation policies, has become a victim of the ongoing lawyers' strike in the city. Devesh Aggarwal, President, ISODA informed that though the association had prepared its legal documentation it was unable to present it in court due to the ongoing strike.

On Feb 17, two lawyers allegedly threw rotten eggs on Subramanian Swamy, a lawyer and Janata Party President, in the courtroom, following which the police tried to arrest them, which also resulted in the police baton charging the lawyers within the Madras High Court premise, turning the court premises into a battleground.

It is interesting to note that the petition is being filed in the Chennai court though ISODA's registered office is in Mumbai. Aggarwal stated that this was because they had some good lawyers in Chennai. Harinder Salwan, Secretary, ISODA noted that since the ISODA was a national body it could file the petition from any city.

Amarnath Shetty of LDS Infotech and an ISODA member pointed out that the reason behind this was also because the Chennai state government had issued show cause notices to several partners in Chennai which is why the association is filing its legal petition there as well. Recently around 23 partners in Coimbatore were issues show cause notices asking to declare whether they have paid service tax on software since May 16, 2008, besides declaring the service tax applicable on the rebates they enjoyed on the hardware business since 2004.

Salwan too agreed that this was the other deciding factor for filing the case in the Chennai court. “Since the government had issued show cause notices to the partners in Coimbatore, it is only correct that we file the case in Chennai,” he said.

Sudarshan Ranganathan who is the Regional Secretary-South of ISODA, will drive the legal initiative. “I am the vehicle which will be driving this legal petition and I am glad to be doing it because I will be able to help the entire software channel through this action,” he said.

Incidentally, ISODA wants to take the legal route as its last resort, as it has already made representations to the finance secretary in New Delhi along with FICCI and CII. The software association was also hoping for some benefits in the stimulus package that the government is offering to the Indian industry.

“We had a very positive communication with the Finance Secretary and are therefore hoping we will get some positive notification about the software taxes shortly. This is why we are also holding back our decision to go legal,” Aggarwal added.

ISODA will not have to wait long to see if that notification is coming their way because within the next fortnight the election code of conduct will be applicable and after that the current government will not be able to implement any changes in the taxation policies, and the decision will then be taken by the incoming government.

However, there is no denying that opting for the legal route will be a time consuming and expensive affair. But Aggarwal is confident that ISODA will be able to see it to the end, from funds from its own corpus as well as contributions from other members in the software business, including vendors, distributors and partners.

“We have gotten a lot of support from the entire software industry for taking this effort and though we have not approached vendors and distributors, we have received positive overtures from several quarters, if we need any financial assistance,” Aggarwal added.

Currently no one knows about the liability related to the software taxation policies because every tax consultant offers a different perspective on it. So partners are demanding that the government clarify the reasons for the different taxes applied on the software and the partners' liability therein.